Do the challenges of globalization lead to a redefinition of the current supply chain?
The entire relocation of production and supply chains to China and other countries in the Far East, turned out to be a great risk from the point of view of West producers during the “corona crisis”. The challenges that existed in this regard, during the peak of the pandemic, have already largely caused reflections on the sustainability of global supply chains. The European economy, but also political factors, in the previous period analysed negative effects of globalized production and the assessed the efforts to return to Europe at least systemically relevant production. Something like this has already happened in Europe in the 1970s, when Europe faced high prices and shortages of oil and its derivatives.
Another aspect that can direct new production capacities to our region, and thus to Serbia, as one of the most agile investment destinations, is the fact that the “corona crisis” revealed the vulnerability of producers who bases their production on “just-in-time” inventory management model. Although this inventory management model was created as a result of efforts to produce high quality and competitive products, while minimizing the cost of their production, problems with supply transportation during the peak of the pandemic will certainly force large European producers to regionalize their supply chains. This is not just about this year’s pandemic, but also a projection that in a globalized world, such situations can be repeated at certain intervals.
This trend can lead to physically closer and higher production of stocks and in connection with that, new business opportunities will open up (eg logistics, infrastructure, construction of storage facilities, etc.).
To summarize, solving the challenges that appeared in the “corona crisis” will be a huge challenge in the coming years, which will create new opportunities for companies and national economies in Southeast Europe, and thus for Serbia.
In addition to traditional roles, which of the following roles should the CFO pay more attention to?
Market trends and the evolution of the function of financial directors also require a redesign of the responsibilities and competencies of the financial function. CFO Research (TPA Serbia, August 2020) indicates that there is a need to innovate both internal and external aspects of work. 41.6% of respondents expressed the view that they should pay more attention to organizational transformation, 21.8% to big data and analysis, 18.2% to strengthening digital literacy, and 18.2% to greater market orientation. The needs are very diversified, but they clearly indicate that it is desirable to review the existing model of work.
The results of a survey conducted by TPA Serbia indicate that 87.3% of companies are not considering redefining the current supply chain, 10.9% are still planning a new way of organizing the supply chain, while 1.8% have decided to redirect supply from global to local and regional suppliers.
When we talk about the period before the “corona crisis”, Serbia was well positioned and perceived as a desirable destination by investors, and that is one of the greatest achievements of our economy after the world economic crisis in 2008.
For example, in 2018, Serbia had over 100 foreign “greenfield” investment projects and was ranked among the leading destinations for foreign investors in the world, taking into account the size of the economy. It is a serious capital for the next period and I think that with a fine adjustment in relation to the profile of investors we are addressing (I mean primarily focusing on highly developed technologies, with greater added value) we may, conditionally speaking, have benefit in the post-crisis period.
Emphasis must also be placed on environmental protection, which is rigorously implemented in the West. In the end, the last, but also the most important step, which we have to take locally, is to further improve the business ecosystem that must be an absolute priority for future successes in attracting new foreign investors. In addition, improved judicial system, uniform application of legal regulations, efficiency of public administration should be instruments to encourage insufficient domestic investments (first of all I am talking about the small and medium enterprises sector).
When do you expect that the economic consequences of the crisis caused by Covid-19 would be most visible?
The speed of market changes affects the length of the time planning frame. It is known that tourism, automotive industry and aviation industry were among the first to feel the consequences of the crisis. 54.5% of respondents (TPA Serbia, August 2020) believe that the economic consequences of the crisis caused by Covid-19 will be most visible during 2021, 27.3% believe that it will be during the second half of 2020, 12.7% believe that it will be over the next 5 years , and only 5.5% believe that it will be during 2022.
Our clients, with a few exceptions, continue to invest or start planned investments. Certainly, a certain number of economic entities, which is confirmed by our survey, slowed down in relation to investment plans, but in some cases it was not their decision. Namely, during the state of emergency, and even during the summer, certain investments, due to epidemiological measures or restrictions, i.e. difficulties in the travelling of businessmen from abroad, simply could not be realized.
Positive side is that the macroeconomic data, that are coming from our most important economies, i.e. from our most important business partners, are more favorable than expected. Also, most of these countries have offered generous aid packages to their companies, so cataclysmic predictions about economic trends in the next few years will certainly not be achieved.
However, it does not mean that we will not have bad news in the next few years. It is certain is that a number of multinational companies will reorganize, which means that their entities from our country will be shut down and the activities performed by those entities will be merged with one of the strong regional countries in those groups or a strong local partner. Also, it is expected that domestic business systems, especially those in vulnerable industries or those that experienced the “corona crisis” with limited finances, will have serious problems in the next few years. Simply, the domestic sector of small and medium enterprises does not have the capacity, and here I primarily mean on capacity to provide necessary liquidity to cope with the challenges of reduced business volume in a longer period of time.
What does the arrival of the American Financial Corporation (DFC) in Serbia mean from your point of view?
According to the official press release, issued by the American Financial Corporation (DFC), it was announced that the organization in Serbia will primarily deal with the construction of the Belgrade-Pristina highway. There are some unofficial announcements that the activities of that organization will include other economic topics (energy, waste management, social entrepreneurship, etc.). What seems important to me is that the arrival of the DFC is a potentially significant incentive for the arrival of a new wave of American commercial investors. I think it is needless to mention that American companies are the one that set the highest global standards in almost all industries.
You can read complete CFO Research survey HERE.
Source: Business Intelligence Review
